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Why T-Mobile Is Beating AT&T and Verizon

NEW YORK (TheStreet) - T-Mobile US (TMUS - Get Report) shares were surging 8.1% to $31.67 following news that larger rival Sprint (S) was prepping plans to propose a buyout of the carrier as its impressive subscriber growth for the first-quarter shows that consumers are digging its offerings.

T-Mobile, known for its "Un-carrier" initiatives, has been aggressively trying to grab market share by eliminating consumer "pain points," specifically the issue of locking customers into two-year contracts like Verizon (VZ - Get Report), Sprint and AT&T (T - Get Report). T-Mobile has been rolling out programs to entice customers to switch their carrier, with the latest three offerings announced in April, where the company under the "Simple Starter," "Tablet Freedom" and "Overage Freedom" - eliminated all domestic overage charges for consumers, even those on legacy plans. T-Mobile had announced in March 2013 its "Simple Choice" plan that offered no annual service contract and low out-of-pocket costs on smartphones.

The company must be doing something right, given its impressive first-quarter subscriber growth.

T-Mobile reported first-quarter earnings results earlier this morning in which it boasted 2.4 million total net customer additions for the three months, which included more than 1.8 million branded net customer additions, making it the "fastest growing wireless company in America," it said in its earnings release. T-Mobile ended the quarter with 49.1 million customers, it said. On the other hand, the company experienced "record low" churn of 1.5%, down 20 basis points from the fourth quarter and down 40 basis points from the year-earlier period.

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"A year ago I promised that we would bring change to what I called this arrogant U.S. wireless industry. We are delivering on that promise and our results reflect the growing customer revolution that we've ignited," said John Legere, President and CEO of T-Mobile. "We are now approaching 50 million customers, added 2.4 million net new customers in the first quarter alone, and posted our fourth quarter of consecutive service revenue growth, while once again adding more net new postpaid customers than the rest of the industry combined!"

T-Mobile actually posted a net loss of $151 million, or 19 cents a share, for the three months ending March 31, compared to a profit of $106 million, or 20 cents a share in the year-earlier quarter, according to its quarterly filing. However, revenue at the Bellevue, Wash.-based company rose 47% to $6.87 billion year over year. Analysts surveyed by Yahoo! Finance were expecting a loss of 10 cents a share on revenue of $6.92 billion.

Adjusted EBITDA came in at $1.1 billion, down 12.2% sequentially, which it attributed to increased equipment sales due to the "significant acceleration in customer growth and the success of its Un-carrier 4.0 - Contract Freedom offer." Adjusted EBITDA margin was 20% compared to 24% in the fourth quarter of 2013.

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